Business confidence is at a critical stage and the fall in the rate of inflation is an encouraging step in the right direction, according to John Rider, West Midlands chairman of the Institute of Directors.
He said: “This follows on the back of better than expected employment figures, and anything that helps support the fragile state of business confidence is to be welcomed.”
But he cautioned that much more needed to be done to support businesses in the West Midlands.
“We need to see that the money given by the Bank of England to the banks to lend to businesses at reasonable rates actually reaches those who need it.
“In many cases, because of the need to refer every loan decision to a credit committee, it takes several months for a decision to come down from on high, when it is in days, not even weeks, that businesses need decisions if they are to turn their plans into action and take advantage of market opportunities as they occur.
“Of course we do not want to see a return to reckless lending, but the pendulum has swung too far the other way,” he said.
He said that although inflation had come down a further 0.2 per cent in May to 2.8 per cent, this was largely due to downward pressure from petrol and oil and food.
“For West Midlands companies wanting to export, air travel price increases are a major drag and extra costs such as Air Passenger Duty are not helping this country build its business abroad.
“We have to get the economy moving and while a drop in the inflation rate is welcomed, there is still much to be done on ensuring that bank credit reaches the businesses that need it, that companies are encouraged to recruit and that they feel they can reach out abroad without being unfairly penalised as they do so.”